PSMA appeals SBP to extend date of settling outstanding credit lines

LAHORE: The Pakistan Sugar Mills Association (PSMA) has appealed the State Bank of Pakistan to extend date of settling outstanding credit lines of sugar mills of Commercial and Islamic Banks by 31st December, 2024.

In a statement on Saturday, the PSMA said that the association has written a letter to the Governor of Central Bank in this regard and explained the current precarious condition of the Sugar Industry.

The letter reads that the Sugar Mills manufacture 12 months sugar within a short span of three months while they have to make payments to all growers within 15 days of the delivery of sugarcane. It is not possible for the sugar mills to manage such huge amounts to make payments within 3 months for entire year sugar. Commercial and Islamic Banks support the sugar industry through seasonal credit lines against pledge of stocks by providing working capital to run their business smoothly and to ensure timely payments to the sugarcane growers as well.

Sugar industry had 7.54 MMT of government-verified sugar stocks available after crushing season of 2023-24 against its domestic consumption of 6 MMT. Since then, PSMA has been requesting the government to allow export of available surplus sugar of nearly 1.5 MMT to ensure timely payments to growers and to pay off bank loans. But despite earnest appeals of the sugar industry, only a meagre quantity of 0.15 MMT out of huge surplus has been allowed to be exported.

In the given circumstances, it would be impossible for sugar mills to clear approximately Rs.200 billion of outstanding credit lines of Commercial and Islamic Banks by 30th September, 2024 unless the industry is permitted to export the surplus sugar. Moreover, due to existing stocks, sugar mills would be compelled to delay start of crushing season.

The PSMA has requested the SBP to issue instructions to all banks to extend the date till 31st December, 2024 for sustaining the local sugar industry causing import substitution of nearly US$4 billion.

Furthermore, the PSMA is of considered opinion that the government is under estimating the brewing crisis that would erupt at the start of crushing season due to enormous surplus sugar stocks and it would not be possible for the sugar industry to timely start the crushing season until the present surplus stocks of sugar is sold in the market.

Due to recent developments in Brazil, the international sugar market has increased by about US$60 per ton and reached US$586 per ton. It is a divine-gifted opportunity for the government to rectify its earlier mistake of not allowing export of surplus sugar to avoid losing US$600 million worth of foreign exchange.

Deregulating the industry will ease the problems of the sugar industry ultimately benefiting the growers and domestic sugar consumers, and the industry will also be saved from destruction. Farmers and the country’s economy will also benefit enormously and sugarcane growers will get good cane rates, said a spokesman of the PSMA.

Copyright Business Recorder, 2024